5 February 2021
Investing in UK markets delivered much stronger returns than cash from 1996 to 2020
Many events have rocked stock markets over the past 25 years – the Dot-com bubble, global financial crisis, Brexit, and Covid-19 pandemic to name a few – but holding cash would have left savers in a far worse position in real terms than investing their money in stocks.
Figure 1: Total returns from 1996 to the end of 2020 from cash and UK stocks
Source: Refinitiv Datastream
Analysis from Brewin Dolphin, the wealth manager, found that depositing £100 in 1996 would be worth £133.07 today in real terms – adjusted for inflation1 – a gain of +33%2.
By comparison, investing in the FTSE 250 over the 25-year period would have delivered a +540.51% total real return – combining share price changes and dividend income, adjusted for inflation – while the FTSE 100 and FTSE All Share provided total returns of +160.73% and +193.92%, respectively.
In fact, holding cash from 2011 to the end of 2020 would have seen its value fall in real terms to £87.82, as inflation picked up and interest rates remained low following the financial crisis of 2008. Meanwhile, investors in the UK’s FTSE 100, 250, and All Shares markets saw real returns of +33.87%, +93.68%, and +43.65% respectively.
Figure 2: What £100, held as cash or in stock indices, would be worth in real terms
1996 – 2020 | |||
Source: Refinitiv Datastream
Rob Burgeman, senior investment manager at Brewin Dolphin, said: “If you are looking for your money to at least maintain its value in real terms, or even grow, you must have exposure to equities. Putting aside the speculative nature of companies in some sectors, the shares of which can be incredibly volatile, look for stable, staple companies that help create and maintain the world we live in. Ultimately, if inflation picks up, these kinds of assets tend to hold their value over time, creating in-built protection against rising costs – albeit with more volatility than holding onto cash.
“Stock markets might go up and down, but that shouldn’t change how much butter goes on your toast – you should only ever invest what you can afford. What happens on a daily, or even monthly, basis can be quite alarming at times, but values only matter when you need to use the money. Established companies make real things and deliver real services, making real profits that provide real dividends – all of this builds up over time, so the longer you can wait, the better. An investment manager, like Brewin Dolphin, will put together a diverse portfolio of assets that deliver growth over the long term, while managing risk.
“If you have a twenty-year time horizon, you will almost certainly experience at least one market downturn. Stock markets do not move in straight lines and have even underperformed cash at times. They can have quite large pullbacks that come out of the blue – and we have seen a range of these over the past two decades, between the Dot-com bubble, financial crisis, and Covid-19 pandemic. While these can be uncomfortable experiences from an investment perspective, provided you didn’t need your invested money, they were just a moment in time.
“As ever with global markets, there are always companies that do better during these periods and some re-appraisal of holdings is called for – and those re-assessments can be done when necessary. Nevertheless, equities have a fundamental survivability that is demonstrated by their robust performance over the last two decades. Like anything else, though, they are not static and a list of the top ten companies in the world 20 years ago will be very different to today’s – the same will likely be the case in another two decades.”
– ENDS –
PRESS INFORMATION
For further information, please contact:
Peter McFarlane peter.mcfarlane@framecreates.co.uk / Tel. +44 (0)7412 739 093
Richard Janes richard.janes@brewin.co.uk / Tel. +44 (0) 20 3201 3343
Siân Robertson: Sian.Robertson@brewin.co.uk / Tel: (0) 20 3201 3026
Anita Turland: anita.turland@brewin.co.uk / Tel: (0) 20 3201 4263
Payal Nair payal.nair@brewin.co.uk / Tel: +44 (0) 20 3201 3342
NOTES TO EDITORS
Five-year returns in real terms:
Disclaimers:
The value of investments, and any income from them, can fall and you may get back less than you invested., Neither simulated nor actual past performance are reliable indicators of future performance., Information is provided only as an example and is not a recommendation to pursue a particular strategy., Information contained in this document is believed to be reliable and accurate, but without further investigation cannot be warranted as to accuracy or completeness.
About Brewin Dolphin
Brewin Dolphin is a UK FTSE 250 provider of discretionary wealth management. With £51.4* billion in total funds, it offers award-winning personalised wealth management services that meet the varied needs of our clients including individuals, charities and corporates.
We give clients security and wellbeing by helping them to protect and grow their wealth, in order to enrich their lives by achieving their goals and aspirations. Our services range from bespoke, discretionary investment management to retirement planning and tax-efficient investing. Our focus on discretionary investment management has led to significant growth in client funds and we now manage £44.6* billion on a discretionary basis.
Our intermediary business manages £15.8* billion of assets for over 1,700 advice firms either on a discretionary basis or via our Managed Portfolio Service.
In line with the premium we place on personal relationships, we’ve built a network of 34 offices across the UK, Jersey and Dublin, staffed by qualified investment managers and financial planners. We are committed to the most exacting standards of client service, with long-term thinking and absolute focus on our clients’ needs at the core.
For more information, visit: www.brewin.co.uk
*as at 31st December 2020
1 Based on consumer price index (CPI) data
2 Based on Bank of England base rates